Nasdaq Hits Record High: 5 Tech Stocks Defying Trade Fears

By Swarup Gupta, Zacks Investment Research

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After hitting a record high last week, the Nasdaq hit a fresh peak on Jun 20. Investors feel tech stocks can continue to chalk up gains even as trade relations between the United States and China worsen. This is because they are less susceptible to tariffs than industrials. Also, China’s ability to act against U.S. tech companies may be limited by its efforts to build its own tech industry.

Investors also remain hopeful that negotiations can reduce the impact of tariffs.  Germany’s decision to do away with car tariffs is an example of how trade disputes can be settled amicably. With the economy in fine fettle and no signs of a bubble in sight, investing in tech stocks still looks like a profitable option.

Tech Stocks Surge Higher, Germany Dials Down Tensions

The Nasdaq gained 0.7% on Jun 20 to hit a new all-time high, boosted primarily by Facebook (NASDAQ:FB) and Netflix (NASDAQ:NFLX) which also hit record levels. Shares of Facebook and Netflix gained 2.3% and 2.9%, respectively.

Netflix’s surge was attributable to Disney’s revised offer for Fox’s entertainment business. Subsequently, other media majors like Netflix and Viacom (NASDAQ:VIAB) gained with investors speculating that more such deals are around the corner.

Meanwhile, heads of BMW (OTCMKTS:BAMXF), Volkswagen (OTCMKTS:VLKAY) and Daimler (OTCMKTS:DDAIF) met the U.S. ambassador to Germany, according to The Wall Street Journal. During the meeting, they floated the idea of abolishing car tariffs between the United States and the EU. This development has dialed down trade tensions and indicates that negotiations could reduce the impact of tariffs.

Can Tech Stocks Withstand Tariff Shocks?

Investors increasingly feel that tech stocks are not as susceptible to tariffs as say home appliance markets or industrial companies. According to Sameer Samana, a strategist at Wells Fargo’s (NYSE:WFC) Investment Institute, losses suffered by U.S. markets due to trade tensions are largely temporary. Ultimately, investors choose to focus on the strong performance of the domestic and global economies.

Samana stresses that tech companies have been the leading gainers during market recoveries from losses attributable to trade-related issues. This is primarily because of their strong earnings performances. Further, China’ ability to impose tariffs on U.S. tech companies may be limited even as its attempts to build up its own tech industry.

Our Choices

Tech stocks have chalked up strong gains despite the persistence of trade tensions. Investors feel that technology may be not be as vulnerable to tariffs as other sectors, such as industrials. Further, China may not be able to raise tariffs on tech companies beyond a point as its attempts to develop its own tech sector.

Investing in tech stocks, which make up the Nasdaq, looks like a smart option at this time. However, picking winning stocks may be difficult.

This is where our VGM Score comes in. Here V stands for Value, G for Growth and M for Momentum and the score is a weighted combination of these three scores. Such a score allows you to eliminate the negative aspects of stocks and select winners. However, it is important to keep in mind that each Style Score will carry a different weight while arriving at a VGM Score.

We have narrowed down our search to the following stocks, each of which has a Zacks Rank #1 (Strong Buy) and a good VGM Score.

Micron Technology (NASDAQ:MU) has established itself as one of the leading worldwide providers of semiconductor memory solutions.

Micron has a VGM Score of A. The company’s projected growth rate for the current year is more than 100%. The Zacks Consensus Estimate for the current year has improved 4.1% over the last 30 days.

Seagate (NASDAQ:STX) is the second-largest manufacturer of hard disk drives (HDDs) in the United States.

Seagate has a VGM Score of A. It has expected earnings growth of 29.6% for the current year. The Zacks Consensus Estimate for the current year has improved 8.3% over the last 60 days.

Western Digital (NASDAQ:WDC) is one of the largest HDD producers in the United States.

Western Digital has a VGM Score of A. The company has expected earnings growth of 59.5% for the current year. The Zacks Consensus Estimate for the current year has improved 4.9% over the last 60 days.

Immersion Corporation (NASDAQ:IMMR) develops hardware and software technologies that enable users to interact with computers using their sense of touch.

Immersion Corporation has a VGM Score of A. The company’s projected growth rate for the current year is more than 100%.  The Zacks Consensus Estimate for the current year has improved 51.5% over the last 60 days.

Nanometrics (NASDAQ:NANO) is a leading provider of advanced, high-performance process control metrology and inspection systems used primarily in the fabrication of semiconductors and other solid-state devices.

Nanometrics Incorporated has a VGM Score of B. It has expected earnings growth of 84% for the current year. The Zacks Consensus Estimate for the current year has improved 36.1% over the last 60 days.

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Article printed from InvestorPlace Media, https://investorplace.com/2018/06/nasdaq-hits-record-high-5-tech-stocks-defying-trade-fears-ggsyn/.

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